By Peter Kennedy
Nevsun Resources Ltd. [NSU-TSX, NYSE American], the target of a $1.4 billion takeover bid from Lundin Mining Corp. [LUN-TSX; LUMI-Sweden], has reported a second quarter loss of US$9.3 million, or US$0.03 per share. Revenue in the quarter was US$76.4 million.
Nevsun is a leading mid-tier base metals company. It operates Bisha, a high-grade open pit copper-zinc mine in Eritrea and is developing the Timok copper-gold project in Serbia. Timok is located in the historic Bor mining district and benefits from close proximity to existing mining infrastructure.
“At Timok, the initial resource declaration for the Lower Zone confirmed the project as one of the largest copper porphyry discoveries in recent years and highlighted why we are so optimistic about the deposit’s long-term prospects,” said Nevsun Chief Executive Officer Peter Kukielski.
He said production volumes at the Bisha Mine were down in the second quarter, principally due to the processing of lower grade material. However, the company expects to revert to processing higher grade material through the balance of 2018.
“Most importantly, we were able to convert a portion of our extensive resources to reserves in a capital efficient, economically attractive mine life extension, which is expected to extend Bisha cash flows, reducing Timok funding requirements,” Kukielski said.
The company said it is on track to meet full year 2018 guidance with quarterly production of 51.3 million pounds of zinc and 8.6 million pounds of copper.
However, it said revenue in the quarter was impacted by lower zinc prices in June, resulting in downward provisional pricing adjustments.
Meanwhile, Nevsun acknowledged that it has received an unsolicited offer from Lundin Mining for all the outstanding shares of the company.Â “Nevsun shareholders are advised to take no action until the board of directors has made a formal recommendation to shareholders,” the company said in a press release.
The offer will remain open for a minimum of 105 days, allowing Nevsun shareholders until November 9, 2018, to respond.
News of the formal $4.75 per share all cash offer, worth $1.4 billion, means Lundin has abandoned the complicated joint proposal whereby Lundin was seeking to only acquire Nevsun’s Timok copper-gold project in Serbia, leaving Euro Sun Mining Inc. [ESM-TSX, CPNFF-OTC] with the producing Bisha Mine in Eritrea
Timok accounts for 89% of Nevsun’s asset value, according to a Scotiabank report.
Lundin said it is launching the hostile bid after failing to convince Nevsun’s board to agree to a friendly deal over the past nine months.
“We also listened to Nevsun shareholders who have indicated to us they want choice,” said Lundin CEO Paul Conibear. “Consequently, we felt we had to present our all-cash premium offer directly to you.”
Nevsun shares were largely unchanged in early trading Friday, when the shares fell 0.62% or $0.03 to $4.81.